WASHINGTON -- The Concord Coalition warned lawmakers today that new projections released by the nonpartisan Congressional Budget Office (CBO) confirm the need for tough choices to bring the budget back into balance. As demonstrated by a series of alternative assumptions in the CBO report, failure to make trade-offs between competing spending priorities and tax policy risks the continuation of large chronic deficits for as far as the eye can see.
“While much attention has been understandably paid to the burgeoning budget deficits projected for 2003 and 2004, a far more problematic development is the growing likelihood that sizable deficits will persist long after the economy has fully recovered. Permanent deficits pose a threat to the economy - particularly with the need to find resources to fund the unfunded retirement benefits of the baby boomers,” said Robert Bixby, Executive Director of The Concord Coalition.
The projected 10-year deficit of $1.4 trillion ($3.8 trillion if the “off-budget” Social Security surplus is excluded) is the most pessimistic outlook CBO has published since 1997. Even so, the official baseline understates the likely deficits because it does not assume policy changes such as the extension of expiring tax cuts, or the enactment of a Medicare prescription drug benefit. And, it assumes a substantial slowdown in the recent 5-year growth rate of appropriations - from 7.7 percent annually to 2.7 percent.
“Congress and President Bush have some hard choices to make when they return from vacation. For example, two popular initiatives - permanently extending all expiring tax cuts, including recent adjustments to the alternative minimum tax, and enacting a Medicare prescription drug benefit - would increase the projected deficit by a staggering $3 trillion over the next 10 years. Moreover, if appropriations continue to grow by 7.7 percent per year the deficit will balloon by at least another $3 trillion,” Bixby said.
“These numbers do not present a hopeless scenario. They present a serious challenge for lawmakers. All priorities must be reexamined to ensure that the budget can be brought into balance again as the economy recovers, and that we return to a position of fiscal strength in time to deal with the even greater long-term challenges,” Bixby said.